Just like you never want to hear a doctor say "oops" in the operating room, you never want to see a going-concern statement in a financial report about a company you own. Accountants throw these in when they've been over the books, talked to customers, and checked the horoscopes and have concluded there is "substantial doubt" about a company's ability to remain in business. In short, don't blame the accountants if the company files for bankruptcy protection.

You¿d reckon that a going-concern statement would be enough to send investors running to the exits, but it's not. True, many large institutions automatically bail when an existing company gets slapped with one of these, but many individuals (often wrongly) take a chance they know more than the bean counters.

During the tech boom of the late 1990s, many companies actually went public even though they had been hit with going-concern statements. Many of those companies subsequently disappeared. Enough said.

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Thursday, May 15, 2008

GE Confirms Plan to Shed Appliance Business

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Associated Press

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FAIRFIELD, Conn.--General Electric Co. plans to auction off its Louisville, Ky.-based appliances business.

GE said in a statement that the auction is part of the company’s plan to exit “slower growth and more volatile businesses."

Based in Fairfield, Conn., GE’s manufactures home appliances like ovens and refrigerators.

Because GE’s sales are predominantly based in the U.S., its revenue hinges on “the rise and fall of a single market," according to the statement.

Sales from GE’s appliance business are expected to slack this year by 10 to 12%, according to the AP. Last year, the appliance business had revenue of $7 billion.

GE has hired Goldman Sachs Group Inc. (GS) to run an auction for the appliance division, according to the Wall Street Journal, which quoted unidentified sources. The sale could yield between $5 billion and $8 billion, the Journal reported.

GE last year took in $11.6 billion in its sale of its plastics division. Chief Executive Jeff Immelt has been under pressure to restructure the industrial and financial conglomerate, particularly since last month's surprising first-quarter earnings report that profit fell 6%.

GE entered the appliance business in 1907. Revenue for GE's Louisville-based industrial business, which includes appliance manufacturing, was nearly $17.73 billion in 2007, down slightly from $17.74 billion in 2006.

Total revenue for GE last year was $172.7 billion.